QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 333-202071

DATASEA INC.

(Exact name of registrant as specified in its charter)

Nevada

45-2019013

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

1 Xinghuo Rd. Changning Building, Suite 21BC1

Fengtai District, Beijing, P.R. China

100070

(Address of principal executive offices)

(Zip Code)

(86)10-58401996

(Registrant's telephone number, including
areacode)

N/A

(Former name,
former address and former fiscal year, if changed since last report)

Indicate by check mark whether the issuer (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes ☒
No ☐

Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

(Do not check if a smaller reporting company)

☐

Smaller reporting company

☒

Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No ☒

Number of shares of issuer's common
stock outstanding as of November 14, 2016 was 55,692,271.

Datasea Inc. (the “Company”) was
incorporated in the State of Nevada on September 26, 2014 under the name Rose Rock Inc. and changed its name to Datasea Inc. on
May 27, 2015 by amending its articles of incorporation.

On May 26, 2015, the Company’s founder,
Xingzhong Sun, sold 20,000,000 shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”)
to Zhixin Liu, one of the owners of Shuhai Skill (HK) as defined below. On October 27, 2016, Mr. Sun sold his remaining 5,000,000
shares of Common Stock of the Company to Ms. Liu.

On October 29, 2015, the Company entered
into a share exchange agreement (the “Exchange Agreement”) with the shareholders (the “Shareholders”)
of Shuhai Information Skill (HK) Limited (“Shuhai Skill (HK)”), a limited liability company incorporated on May
15, 2015 under the laws of the Hong Kong Special Administrative Region of the People’s Republic of China (the
“PRC”). Pursuant to the terms of the Exchange Agreement, the Shareholders, who together own 100% of the ownership
rights in Shuhai Skill (HK), transferred all of the issued and outstanding ordinary shares of Shuhai Skill (HK) to the
Company in exchange for the issuance of an aggregate of 4,000,000 (20,000,000 after the forward split described in Note 9)
shares of Common Stock, thereby causing Shuhai Skill (HK) and its wholly owned subsidiaries, Tianjin Information Sea
Information Technology Co., Ltd. (“Tianjin Information”), a limited liability company incorporated under the laws
of the PRC, and Harbin Information Sea Information Technology Co., Ltd. (“Harbin Information”), a limited
liability company incorporated under the laws of the PRC, to become wholly-owned subsidiaries of the Company, and Shuhai
Information Technology Co., Ltd., also a limited liability company incorporated under the laws of the PRC (“Shuhai
Beijing”), to become a variable interest entity (“VIE”) of the Company through a series of contractual
agreements between Shuhai Beijing and Tianjin Information. The transaction was accounted for as a reverse merger, with Shuhai
Skill (HK) and its subsidiaries being the accounting survivor. Accordingly, the historical financial statements presented are
those of Shuhai Skill (HK).

Following the Share Exchange, the Shareholders,
being Zhixin Liu and her father, Fu Liu, owned approximately 85.45% of the outstanding shares of Common Stock. As of October 29,
2015, there were 55,000,000 shares of Common Stock issued and outstanding, 47,000,000 of which were beneficially owned by Zhixin
Liu and Fu Liu.

After the Share Exchange, the Company, through
its wholly owned subsidiaries and VIE entities, is engaged in the business of providing Internet security products, new media advertising,
micro-marketing, and data analysis services in the PRC.

The accompanying
unaudited condensed consolidated financial statements have been prepared assuming that the Company
will continue as a going concern. As shown in the accompanying unaudited condensed consolidated financial statements, the Company
has not generated any revenues since inception, has an accumulated deficit of $1,594,424 at September 30, 2016, and has incurred
losses since inception. These circumstances, among others, raise substantial doubt about the Company’s ability to continue
as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments that might result
from the outcome of this uncertainty.

The Company’s management recognizes that
the Company must generate sales and additional resources to enable it to continue to develop its operations. Based on increased
demand for internet services in China, including internet security and big data integration, the Company’s management team
expects a healthy growth in its business. The Company’s management intends to raise additional financing through debt and
equity financing or through other means that it deems necessary, with a view to moving forward and sustaining prolonged growth
in its initial phases. However, no assurance can be given that the Company will be successful in raising additional capital.

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Basis
of Presentation and Consolidation

The accompanying
unaudited condensed consolidated financial statements include the financial statements of the Company and its 100% owned subsidiaries
of Shuhai Skill (HK)”), Tianjin Information, Harbin Information and Shuhai Beijing.

The accompanying unaudited
condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments
and elimination of intercompany transactions upon consolidation) which are, in the opinion of management, necessary to fairly present
the operating results for the respective periods. Certain information and footnote disclosures normally present in the annual condensed
consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of
America have been omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should
be read in conjunction with the audited condensed consolidated financial statements and notes for the year ended June 30, 2016.
The results of the three month periods ended September 30, 2016 are not necessarily indicative of the results to be expected for
the full year ending June 30, 2017.

The preparation of
unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates. The significant areas requiring the
use of management estimates include, but are not limited to, estimated useful life and residual value of property, plant and equipment,
provision for staff benefit, recognition and measurement of deferred income taxes and valuation allowance for deferred tax assets.
Although these estimates are based on management’s knowledge of current events and actions management may undertake in the
future, actual results may ultimately differ from those estimates and such differences may be material to our consolidated financial
statements.

Contingencies

Certain conditions
may exist as of the date the unaudited condensed consolidated financial statements are issued, which may result in a loss to the
Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and
legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing
loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such
proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as
well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability
would be accrued in the Company’s financial statements.

If the assessment
indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated,
the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would
be disclosed.

START-UP
COSTS

In accordance with
ASC 720, “Start-up Costs,” the Company expenses all costs incurred in connection with the start-up and organization
of the Company.

Cash and cash equivalents include cash on hand,
demand deposits and short-term cash investments that are highly liquid in nature and have original maturities of three months or
less. The Company has no cash equivalents as of September 30, 2016 and June 30, 2016.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost,
less accumulated depreciation. Major repairs and improvements that significantly extend original useful lives or improve productivity
are capitalized and depreciated over the period benefited. Maintenance and repairs are expensed as incurred. When property and
equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts,and
any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method
over estimated useful lives as follows:

Furniture and fixtures

5-10 years

Office equipment

3-5 years

Leasehold improvements are depreciated on a
straight-line method over the shorter of estimated useful lives or lease terms.

INTANGIBLE ASSETS

Intangible assets
with finite lives are amortized using the straight-line method over their estimated period of benefit. Evaluation of the recoverability
of intangible assets is made to take into account events or circumstances that warrant revised estimates of useful lives or that
indicate that impairment exists. All of our intangible assets are subject to amortization. The Company acquired Value added telecommunications
business license on September 28, 2015.
No impairment of intangible assets has been identified as of the balance sheet dates.

Intangible assets include licenses and certificates
and are amortized over their useful life of five years.

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

●

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

●

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Certain of the Company’s financial instruments,
including cash, accrued expenses and other payables, are carried at costs, which approximate their fair values due to their short
maturities.

As of September 30, 2016, the Company did not
identify any assets and liabilities that are required to be presented on the balance sheet at fair value on a recurring basis.

IMPAIRMENT OF LONG-LIVED ASSETS

In accordance with the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-10, Accounting for the Impairment
or Disposal of Long-Lived Assets, long-lived assets such as property, plant and equipment are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, or it is reasonably possible
that these assets

could become impaired as a result of technological
or other industrial changes. The determination of recoverability of assets to be held and used is made by comparing the carrying
amount of an asset to future undiscounted cash flows to be generated by the assets.

If such assets are considered to be impaired,
the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. During the
reporting periods there was no impairment loss recognized on long-lived assets.

The Company recognizes revenues from professional
services contracts. Customers are billed, according to individual agreements. Revenues from professional services are recognized
on a completed-contract basis, in accordance with ASC Topic 605-35, “Construction-Type and Production-Type Contracts.”
Under the completed-contract basis, contract costs are recorded to projects in process and billings and/or cash received are recorded
to a deferred revenue liability account during the periods of construction. Costs include direct material, direct labor and subcontract
labor. All revenues, costs, and profits are recognized in operations upon completion of the contract. A contract is considered
completed when all costs except insignificant items have been incurred and final acceptance has been received from the customer.
Corporate general and administrative expenses are charged to the periods as incurred. However, in the event a loss on a contract
is foreseen, the Company will recognize the loss as incurred. For uncompleted contracts, the deferred asset (accumulated contract
costs) in excess of the deferred liability (billings and/or cash received) is classified under current assets as costs in excess
of billings on uncompleted contracts. The deferred liability (billings and/or cash received) in excess of the deferred asset (accumulated
contract costs) is classified under current liabilities as billings in excess of costs on uncompleted contracts. Contract retentions
are included in accounts receivable.

In January 2016, the Company secured a government
procurement contract with the Bureau of Public Security of Daqing City in Heilongjiang Province. As of September 30, 2016, the
project has not been completed.

INCOME TAXES

The Company uses the asset and liability method
of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense
is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary
differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided
to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely
than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting
for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold
and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken
in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods
presented.

The Company maintains cash in accounts with
state-owned banks within the PRC. Cash in state-owned banks is not covered by insurance. Should any of these institutions holding
the Company’s cash become insolvent, or if the Company is unable to withdraw funds for any reason, the Company could lose
the cash on deposit with that institution. The Company has not experienced any losses in such accounts and believes it is not exposed
to any risks on its cash in these bank accounts.

FOREIGN CURRENCY TRANSLATION AND COMPREHENSIVE INCOME (LOSS)

The accounts of the
Company’s Chinese subsidiary are maintained in RMB and the accounts of the U.S. parent company are maintained in USD. The
accounts of the Chinese subsidiary were translated into USD in accordance with Accounting Standards Codification (“ASC”)
Topic 830 “Foreign Currency Matters.” All assets and liabilities were translated at the exchange rate on the balance
sheet date; stockholders’ equity is translated at historical rates and statement of income items are translated at the weighted
average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance
with ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from the foreign currency transactions are reflected
in the statements of income.

The Company follows FASB ASC Topic 220-10,
“Comprehensive Income.” Comprehensive income comprises net income and all changes to the statements of stockholders’
equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders.

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2015, the FASB issued ASU 2015-17,
"Balance Sheet Classification of Deferred Taxes," which simplifies the presentation of deferred taxes by requiring
that deferred tax assets and liabilities be presented as noncurrent on the balance sheet. ASU 2015-17 is effective for annual reporting
periods, and interim periods therein, beginning after December 15, 2015 (fiscal year 2017 for the Company). The Company adopted
this guidance, prospectively, as of November 30, 2015.

In February 2016, the FASB issued ASU 2016-02,
"Leases (Topic 842)" to increase the transparency and comparability about leases among entities. The new guidance requires
lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional
disclosures about leasing arrangements. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018,
and requires a modified retrospective approach to adoption. Early adoption is permitted. The Company is currently evaluating the
impact of this new standard on its consolidated financial statements and related disclosures.

In April 2016, FASB issued Accounting Standards
Update No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments
clarity the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance.
The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for
the amendments are the same as the effective date and transition requirements in Topic 606. Public entities should apply the amendments
for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018,
for a calendar year entity). Early application for public entities is permitted only as of annual reporting periods beginning after
December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the impact
of this new standard on its unaudited condensed consolidated financial statements.

In May 2016, FASB issued ASU No. 2016-12—Revenue
from Contracts with Customers (Topic 606); Narrow-Scope Improvements and Practical Expedients, which is intended to not change
the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential
for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition
and on an ongoing basis. The Company is assessing the impact of the adoption of the ASU on its unaudited condensed consolidated
financial statements, disclosure requirements and methods of adoption.

Note 4 – PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows:

September 30, 2016

June 30, 2016

Office furniture and fixtures

$

58,999

59,191

Office equipment

34,957

33,270

Leasehold improvements

39,462

39,591

Subtotal

133,419

132,052

Less: Accumulated depreciation

35,458

29,551

Total

$

97,961

$

102,501

Depreciation expense for the three months ended
September 30, 2016 and 2015 was $6,005 and $3,140, respectively.

The Company acquired intangible assets during
September and December 2015, amortization expense for the three months ended September 30, 2016 and 2015 was $336 and $109, respectively.

NOTE
6 –PROJECTS IN PROGRESS

Projects in progress represent costs accumulated
on projects at various stages of completion. Projects in progress are classified as short-term because the projects are expected
to be completed within one year.

Note
7 – Prepaid expenses and other current assets

Prepaid expenses and other current assets
consisted of the :following:

The Company’s President, Zhixin Liu,
paid certain operating expenses on behalf of the Company. As of September 30, 2016 and June 30, 2016, the amounts due to the President
were $84,557 and $176,621, respectively. These amounts are interest-free, unsecured and due on demand. The President of the Company
is expected this loan to be repaid. As of September 30, 2016, the Company has not received any demand for payments.

On January 1, 2016, the Company’s President
entered into a car rental agreement with the Company. Pursuant to the agreement, the Company rents a car from the Company’s
President for a monthly rent of approximately $750. The agreement expires on December 31, 2016.

Note
10 – income taxes

The Company was incorporated in the United
States of America, is subject to U.S. tax and files U.S. federal income tax returns. The Company conducts all of its businesses
through its subsidiaries and affiliated entity. The Company’s effective tax rate is 15% for income tax for the three
months ended September 30, 2016. Based on the weight of available evidence, including cumulative losses since inception and expected
future losses, the Company has determined that it is more likely than not that the deferred tax asset amount will not be realized
and therefore a valuation allowance has been provided on net deferred tax assets.

The Company’s offshore subsidiary, Shuhai
Skill (HK), did not earn any income that was derived in Hong Kong for the three months ended September 30, 2016, and therefore
did not incur any Hong Kong Profit tax.

Under the Corporate Income Tax Law of the People’s
Republic of China (PRC), the Company’s offshore subsidiaries in PRC has effective tax rate of 25%.

On November 17, 2015, the Company affected
a five-for-one forward split of the Company’s Common Stock, increasing the number of authorized shares from 75,000,000 to
375,000,000 and the number of shares of issued and outstanding Common Stock from 11,000,000 to 55,000,000. The financial statements
have been retroactively adjusted to reflect this forward split.

During the year ended June 30, 2016, the Company’s
President, Zhixin Liu, contributed RMB 4,256,300 ($683,485) to the Company.

In February and March 2016, the Company entered
into subscription agreements with 42 individual investors and sold 207,000 shares of the Company’s Common Stock at $0.92
and 40,000 shares of the Company’s Common Stock at $1.38 per share. The Company received the proceeds of $248,453 from sale
of Common Stock.

On May 31, 2016, the Company entered into subscription
agreements with 11 investors and sold 140,271 shares of the Company’s Common Stock at $1.38 per share. The Company received
the proceeds of $193,574 from sale of Common Stock.

On August 14, 2016, the Company entered into
subscription agreements with investors and sold 75,000 shares of the Company’s Common Stock at $1.38 per share. The Company
received the proceeds of $103,500 from sale of Common Stock.

On September 30, 2016, the Company entered
into subscription agreements with investors and sold 230,000 shares of the Company’s Common Stock at $1.38 per share. The
Company received the proceeds of $317,400 from sale of Common Stock.

In February 2016, the Company leased another
office in the same building under a one-year operating lease agreement. The lease will expire on February 28, 2017 and has a monthly
rent of RMB 27,375 (or approximately U$4,259). Future rental payments due under the lease were RMB 136,815 (or approximately $20,524).

Rental expenses for the three months ended
September 30, 2016 and 2015 were $12,777 and $15,366, respectively.

In January 2016, the Company secured a government
procurement contract with the Bureau of Public Security of Daqing City in Heilongjiang Province. Upon completion of such contract,
the Company will be required to provide 5 years warranty for terminal features collection equipments and lifetime warranty for
software updates. We estimated the cost will be RMB 393,000(or approximately $58,956).

NOTE
13 – SUBSEQUENT EVENTS

The Company has reviewed its subsequent events
through the date these unaudited condensed consolidated financial statements were issued and has determined that no material subsequent
events have occurred that require recognition in or disclosure to the unaudited condensed consolidated financial statements.

ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This report contains forward-looking
statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than
statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including,
but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and
objectives of management for future operations; any statements concerning proposed new services or developments; any statements
regarding future economic conditions of performance; and statements of belief; and any statements of assumptions underlying any
of the foregoing. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause
our actual results, performance or achievements to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements.

In some cases, you can identify forward
looking statements by terms such as “may,” “intend,” “might,” “will,” “should,”
“could,” “would,” “expect,” “believe,” “anticipate,” “estimate,”
“predict,” “potential,” or the negative of these terms. These terms and similar expressions are intended
to identify forward-looking statements. The forward-looking statements in this report are based upon management’s current
expectations and belief, which management believes are reasonable. However, we cannot assess the impact of each factor on our business
or the extent to which any factor or combination of factors, or factors we are aware of, may cause actual results to differ materially
from those contained in any forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements.
These statements represent our estimates and assumptions only as of the date of this report. Except to the extent required by federal
securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.

You should be aware that our actual
results could differ materially from those contained in the forward-looking statements due to a number of factors, including:

• uncertainties relating to
our ability to establish and operate our business in China;

• uncertainties relating to
general economic and business conditions;

• industry trends; changes in
demand for our products and services;

• uncertainties relating to
customer plans and commitments and the timing of orders received from customers;

• announcements or changes in
our pricing policies or that of our competitors;

• unanticipated delays in the
development, market acceptance or installation of our products and services;

• changes in Chinese government
regulations;

• availability, terms and deployment
of capital; relationships with third-party equipment suppliers; and

The Company was incorporated in the
State of Nevada on September 26, 2014 under the name Rose Rock Inc. and changed its name to the current name on May 27, 2015 by
amending its articles of incorporation.

On October 29, 2015, the Company entered
into an exchange agreement (the “Exchange Agreement”) with Ms. Zhixin Liu and Mr. Fu Liu, the shareholders (“Shareholders”)
of Shuhai Information Skill (HK) Limited (“Shuhai Skill (HK)”). Pursuant to the terms of the Exchange Agreement, the
Shareholders, who together owned 100% of the ordinary shares of Shuhai Skill (HK), transferred all of the issued and outstanding
ordinary shares of Shuhai Skill (HK) to the Company in exchange for the issuance of an aggregate of 20,000,000 shares of the Company’s
Common Stock, thereby causing Shuhai Skill (HK) and its wholly foreign owned subsidiaries, Tianjin Information Sea Information
Technology Co., Ltd., a limited liability company incorporated under the laws of the PRC (“Tianjin Information”), and
Harbin Information Sea Information Technology Co., Ltd., a limited liability company incorporated under the laws of the PRC (“Harbin
Information”) became wholly-owned subsidiaries of the Company, and Shuahi Information Technology Co., Ltd., also a limited
liability company incorporated under the laws of the PRC (“Shuhai Beijing”), became the Company’s variable interest
entity. The transaction was accounted for as a reverse merger, with Shuhai Skill (HK) and its subsidiaries being the accounting
survivor. Accordingly, the historical financial statements presented are those of Shuhai Skill (HK).

On October 27, 2015, the Company’s
founder, Xingzhong Sun, sold all his 5,000,000 shares of Common Stock of the Company to Zhixin Liu. Following the transaction,
Zhixin Liu and her father, Fu Liu, beneficially owned approximately 85.45% of the outstanding shares of Common Stock. As of October
29, 2015, there were 55,000,000 (post-split) shares of Common Stock issued and outstanding, 45,000,000 of which were owned by Zhixin
Liu and Fu Liu.

On November 12, 2015, the Company effected
a five-for-one forward split (the “Forward Split”) of the Common Stock, pursuant to which each shareholder of the Company
was issued five shares of Common Stock in exchange for each share of their then-issued Common Stock. In conjunction with the Forward
Split, the Company’s authorized shares of Common Stock increased from 75,000,000 shares to 375,000,000 shares. Immediately
following the Forward Split, the Company had a total of 55,000,000 issued and outstanding shares of Common Stock.

Following the reverse merger, the Company,
through its wholly owned subsidiaries and VIE, is in the business of providing Internet security products, new media advertising,
micro-marketing, and data analysis services in the PRC.

The Company started to sell its products
during the calendar year 2016. In January 2016, the Company secured a government procurement contract with the Bureau of Public
Security of Daqing City in Heilongjiang Province. Pursuant to the contract, the Company will install wireless internet terminal
collection equipment and 3G wireless network cards, as well as provide training services related to the use of the equipment for
a total contract price of RMB1,005,000 (approximately $162,844). As of the date of this report, the Company has completed the installation
of this project, and is waiting for acceptance from the Bureau of Public Security of Daqing City. The Company will recognize revenue
for this project upon acceptance by the customer.

The Company believes that the increased
demand for internet security equipment and related services in China, including internet security, micro marketing, new media advertising
and big data integration, presents a great opportunity for the Company to establish and grow its business in the next twelve months
and the Company expects to start generating revenue during the fiscal year ending June 30, 2017.

Results of Operations

Three Months Ended September 30, 2016 and 2015

Revenue

The Company had no revenue for the three
months ended September 30, 2016 and 2015. The Company started to sell its products during the calendar year 2016 and has not generated
any revenue as of September 30, 2016 because the completed project must be accepted to recognize revenue. The Company expects to
start generating revenue during the fiscal year ending June 30, 2017.

Selling, General and Administrative
Expenses

Selling expenses were $44,718 and $0
for the three months ended September 30, 2016 and 2015.

General and administrative expenses
were $225,176 for the three months ended September 30, 2016 which were primarily attributable to research and development costs
and professional fees. General and administrative expenses were $162,307 for the three months ended September 30, 2015, which were
attributable to start-up costs.

Net Loss

Net loss were $266,834 and $162,301
for the three months ended September 30, 2016 and 2015, respectively.

Liquidity and Capital Resources

We have funded our operations to date
primarily through the sale of equity securities, shareholder loans and capital contributions. Based on our current cash level and
management’s forecast of operating cash flows, management has determined that the Company will require additional funds to
finance our planed operations for the next twelve months.

Due to our negative cash flow from operating
activities and no revenue generated yet since inception, our auditors expressed substantial doubt about the Company’s ability
to continue as a going concern. The Company’s management recognizes that the Company must generate sales and additional resources
to continue to develop its operations. Based on increased demand for internet services in China, including internet security and
big data integration, the Company expects to generate revenue during the fiscal year ending June 30, 2017, which will be used to
fund its operations. In addition, the Company intends to raise additional funds through debt and equity financing or through other
means that it deems necessary. However, there can be no assurance that financing will be available in amounts or terms acceptable
to the Company, if at all.

Cash Flows

As of September 30, 2016, we had a working
capital of $83,593. Our current assets on September 30, 2016 were $388,706, primarily consisting of cash of $93,366, prepaid expenses
of $65,980 and $229,360 of project in progress. Our current liabilities were primarily composed of accounts payable of $184,672,
accrued expenses and other payables of $35,884 and loans payable to a shareholder of $84,557.

Cash Flow in Operating Activities

Net cash used in operating activities
was $245,202 during the three months ended September 30, 2016, which primarily consisted of our net loss of $266,834, offset by
a noncash adjustment of $6,341, a change in prepaid expenses and other current assets of $28,486, and accounts payable of $12,663.

Net cash used in operating activities
was $145,574 for the three months ended September 30, 2015. The cash outflow from operating activities was mainly due to net loss.

Cash Flow in Investing Activities

Net cash used in investing activities
totaled $1,795 for the three months ended September 30, 2016, which primarily used for the acquisition of office equipment.

Net cash used in investing activities
was $19,347 for the three months ended September 30, 2015. The net cash outflow from investing activities was primarily due to
the acquisition of new equipment.

Cash Flow in Financing Activities

Net cash provided by financing activities
was $328,641 during the three months ended September 30, 2016, which primarily consisted of payment to related party of $92,259
and the proceeds from sales of the Company’s common stock of $420,900.

Net cash provided by financing activities
was $161,811 for the three months ended September 30, 2015. The net cash inflow from financing activities was due to capital contributions
from our shareholders of $166,515.

There are no off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our financial condition changes in financial condition,
revenues, expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Inflation

We do not believe our business and operations
have been materially affected by inflation.

ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

This item is not applicable as we are
currently considered a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As required by Rule 13a-15 of the Securities
Exchange Act of 1934, our principal executive officer and principal financial officer evaluated our disclosure controls and procedures
(as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered
by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of
the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information
required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the rules and forms of the SEC and to ensure that such
information is accumulated and communicated to our company’s management, including our principal executive officer and principal
financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures
were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which
are indicative of many small companies with a small staff: (i) inadequate segregation of duties and effective risk assessment;
(ii) lack of personnel adequately trained in U.S. GAAP; and (iii) insufficient written policies and procedures for accounting and
financial reporting with respect to the requirements and application of both U.S. GAAP and SEC guidelines. Management anticipates
that such disclosure controls and procedures will not be effective until the above material weaknesses are remediated.

We plan to take steps to enhance and
improve the design of our internal controls over financial reporting. During the period covered by this report, we have not been
able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes
during our fiscal year ending June 30, 2017, subject to obtaining additional financing: (i) appoint additional qualified personnel
to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures
for accounting and financial reporting. The remediation efforts set out above are largely dependent upon our securing additional
financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts
may be adversely affected in a material manner.

Because of the inherent limitations
in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company
have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns
can occur because of simple error or mistake.

Changes in Internal Control over
Financial Reporting

There were no changes in our internal
control over financial reporting during the nine months ended September 30, 2016 that have materially affected or are reasonably
likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is not a party to
any pending legal proceedings and no such proceedings are known to be contemplated.

No director, officer or affiliate
of the issuer, and no owner of record or beneficiary of more than five percent of the securities of the issuer, or any security
holder is a party adverse to the Company or has a material interest adverse to the Company.

ITEM 1A. RISK FACTORS

A smaller reporting company is
not required to provide the information required by this item.

ITEM 2. UNREGISTERED SALES
OF EQUITY SECURITIES

On September 30, 2016, the Company conducted
the closing of a private placement transaction pursuant to subscription agreements (the “Subscription Agreements”)
with a total of 20 investors (the “Investors”), all of whom are non-U.S. persons (as defined in Regulation S (“Regulation
S”) promulgated under the Securities Act. The Investors are all individuals residing in the People’s Republic of China.

Pursuant to the Subscription Agreements, the
Company has issued and sold to the Investors, and the Investors have purchased from the Company, an aggregate of 230,000 shares
(the “Shares”) of Common Stock for a purchase price of $1.38 per share,
for total cash proceeds of $317,400. Pursuant to the Subscription Agreements, the Company has no obligation to register the Shares
for resale under the Securities Act.

The Shares were offered and sold in
reliance upon Regulation S of the Securities Act and are exempt from the registration requirements of the Securities Act. The
Shares have not been registered under the Securities Act or any other applicable securities laws and, unless so registered, may
not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities
Act. The Investors have acknowledged that the Shares issued have not been registered under the Securities Act.

Form of Subscription Agreement used in the Company’s February and March 2016
Regulation S Offering (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
for the period ended March 31, 2016).

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